Experts: AT&T acquisition of T-Mobile may not be dead yet

The U.S. Department of Justice's lawsuit opposing AT&T's proposed acquisition of T-Mobile USA may not mean the end of the deal, according to some experts.

The DOJ, in the lawsuit filed Wednesday, said the merger of two of the nation's four largest mobile carriers would significantly reduce competition and lead to higher prices.

But the DOJ's 25-page antitrust complaint filed in U.S. District Court for the District of Columbia reads more like a move toward a settlement than a document leading to a trial, said David Balto, an antitrust attorney and former policy director at the U.S. Federal Trade Commission. "A lawsuit doesn't mean a trial," said Balto, who has supported the merger.

The DOJ's lawsuit is "really a negotiating ploy to really put themselves in a stronger position to negotiate a consent decree," he added. "This isn't a case that can't be fixed."

Sprint Nextel, Public Knowledge and several other opponents of the US$39 billion merger have argued that no number of concessions by AT&T can overcome the loss of a low-cost competitor in the U.S. mobile market.

AT&T has promised to fight the DOJ's lawsuit. AT&T plans to "ask for an expedited hearing so the enormous benefits of this merger can be fully reviewed," Wayne Watts, the carrier's general counsel, said in a statement Wednesday. "The DOJ has the burden of proving alleged anti-competitive effects and we intend to vigorously contest this matter in court."

If the case does go to trial, Balto expects the trial to start soon, possibly by the end of the year. Judge Ellen Segal Huvelle has a history of asking tough questions of the DOJ in antitrust cases, he said.

Maury Mechanick, a telecom lawyer at the White & Case law firm in Washington, D.C., agreed that AT&T still has options. The company could reach a settlement with the DOJ or it could prevail in a trial, he said. AT&T has a large incentive to press forward, he said.

AT&T has committed to pay T-Mobile a $3 billion breakup fee, in addition to giving it spectrum, if the deal is not completed by September 2012, according to published reports.

However, a court case could drag out for months, or even years, Mechanick said. Even if the DOJ loses its lawsuit in court, the agency could appeal. "Litigation -- even if one of the parties wants it to move quickly -- is a slow, laborious process," he said.

The U.S. Federal Communications Commission still has not completed its review of the deal, and the FCC could seek its own concessions from AT&T, he said.

If the proceedings drag out until late 2012 or 2013, the deal may no longer make as much sense for both companies, Mechanick said. "The question becomes, how tolerant are they of that delay?" he said.

AT&T could propose a restructured deal, with the carrier keeping T-Mobile's spectrum and spinning off the rest of the company to carriers such as Sprint, added Jeff Kagan, an independent telecom analyst. The DOJ, however, may not approve that kind of deal either, he said.

AT&T could still "come back with a 'hail Mary,' all-or-nothing offer," he said. "All they really want is T-Mobile spectrum. The rest was just noise anyway."

AT&T took a "very arrogant" position on regulatory approval of the deal, Kagan added. "They never in their wildest dreams thought it would be turned down," he said. "This was a shock to them."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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